Could labor to restore, repair, or remodel a National Register historic building be purchased tax-free in Texas?

Plain-English summary

The Comptroller said that a person or organization restoring, repairing, or remodeling a building listed in the National Register of Historic Places could purchase the labor tax-free under Rule 3.291(b).

Ordinarily, the owner would give the contractor an exemption certificate for the qualifying labor. Because this requester wanted a direct-pay permit, the letter instructed it to use a separated contract, issue a direct-payment exemption certificate, and remit tax to the state only on the materials charge.

Local city, county, metropolitan transit authority, or city transit department taxes were due based on the location of the restoration.

What this means for you

Under the 1988 guidance, the labor exemption depended on the building being listed in the National Register and the work being restoration, repair, or remodeling. A requester handling tax through a direct-pay permit also needed the contract to separate labor from materials.

Common questions

Was qualifying historic-restoration labor taxable? No. The letter allowed it to be purchased tax-free under Rule 3.291(b).

What did the direct-pay requester owe tax on? The materials charge.

Where were local taxes due? Based on the restoration's location.

Citations and references

• 34 Tex. Admin. Code Rule 3.291(b), cited for the historic-building labor treatment.
• The letter enclosed Rules 3.288, 3.291, 3.356, and 3.357 for reference.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8805L0869A14

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

BOB BULLOCK
Comptroller May 12, 1988

Dear *:

This will confirm our telephone conversation of May 11 concerning
restoration of Historic Buildings.

Persons and organizations, who are restoring, repairing, or remodeling
buildings which are listed in the National Register of Historic Places,
may
purchase the labor to perform those functions tax free. The work would
be
treated under Rule 3.291 (b).

Because you wanted to obtain a direct pay permit and handle the tax
yourself, you'll want to be sure you enter into a "separated" contract
with
the contractor. Ordinarily, you would give the contractor an exemption
certificate in lieu of tax on the labor to restore a building as
described
above. In this case however, you will issue a direct payment exemption
certificate and remit tax to the state only on the materials charge.

Local taxes such as city, county, MTA or CTD will be due based on the
location of the restoration.

I am enclosing Rule 3.288, 3.291, 3.356 and 3.357 for your reference. I
have requested that an application package for a direct payment permit be
sent to you under separate cover.

If you have any questions or need more information, please call our
toll-free
number 1-800-531-5441. The regular number is 512/463-4600. You may write
me
at the Tax Policy Division.

Sincerely,
Al Van Allen
Tax Policy Division